A great - and still growing -
divergence appeared in 2009 between public statements by leaders and their
public performance. The politicized, romanticized theater of increasingly
populist "democratic" leaders and media seemed to be of a different planet from
activities taking place in the real world.

While a large part of the global
population appears still transfixed by words, there is a growing perception that
great fissures already rend the global strategic architecture.

This is a trend which will compound
during 2010.

There is a widespread belief that the
world has "ducked the strategic bullet" of global economic collapse, but this is
merely the delusionary euphoria of the severely wounded patient. Severe
structural damage has occurred to the key driver of global economic stability,
the United States. Most major economies of Western Europe and Asia, although in
plight, have been protected in their fall by a complex web of structures and the
fact that they were not, in many respects, as leveraged as the US. Britain and
Japan, however, remain leveraged in their debt-to-asset ratio, to a
death-defying degree.

All of this has been long in coming,
and brought to a speedy climax by the unprecedented recklessness of inflationary
spending by US Pres. Barack Obama, and, in the UK by Prime Minister Gordon
Brown. The modern world (East and West, but prompted by the West) is at a
junction point in a long process of constantly growing ˇ but poorly-defined ˇ
obsession with "rights" (entitlements). This had its origins with the halting,
but consistent, rise in global prosperity which began with the early stages of
the Second Industrial Revolution (1700-1900).

Thus, a butterfly flutters its wings in
18th Century Britain and a tsunami engulfs the world in the early 21st Century.

Managing the now-overwhelming sense of
entitlement in what we call modern democracies has become, because of the power
of a comprehensive, but ill-informed electorate, an exercise in mob control, and
an opportunity for populist demagoguery.

Pres. Obama's statement of January 25,
2010, that he would now curb US Government spending was, like most of the
statements of the past year, self-serving and had nothing to do with reality.
His plan to push through a State-dominated healthcare system at a reputed cost
in excess of $1-trillion (quite apart from other discussions about a new
"stimulus package" of spending) makes a mockery of the pre-election posturing of
fiscal moderation (that is, his posturing before the 2008 and the 2010
elections).

In any event, a review of the
statistics of the US shows that his proposed "freeze" on a small part of US
Government spending would be, compared with his profligacy and reduction of
private sector productivity and capital formation ability, a derisory diversion.

Without dwelling, for the purposes of
this estimate, on the cumulative impact of ever-broadening the electoral
franchise - which creates an automatic disposition of an electorate to demand
increasing benefits without attendant increases in productivity - the Western
economies are probably at a point where they must attempt to create fairly
draconian, centralized power structures to rule more by diktat than by
"democracy". That is the only recourse to stem the growing dysfunction of
government brought about by the "democratic" necessity to pander to a restive
populace.

In a report on March 20, 2009, I noted:
"the 'professional politician' will morph into new forms of C╩sarism or
Bonapartism. This is already underway, as 'leaders' with no practical experience
of the world increasingly fear the uncertainties of markets and the confidence
of those who can actually create, manage, and build. Thus, the 'new socialism'
is a system built by leaders who demand central control of societies and who
genuinely fear freedom."

The new circus includes the pandering
to newly-created pseudo-scientific religions, such as "climate change", which
have so greatly distracted governments, the media, and populations from their
daily work as to have already hampered the chances for economic viability in the
near future. Those, however, who live by the sword of populism - mob rule - must
ultimately answer to that same fickle crowd, which, as Elias Canetti noted in
Crowds & Power, has no mind, only wants.

Pres. Obama is already facing the
turning crowd, which is why, on January 25, 2010, he began his studied
portraiture of reasonableness and fiscal moderation. The policy analyst,
however, must look to actions, and the feasibility and context of those actions,
and not to the words which attend them.

Let me highlight some of the cautions
which I have made over recent years, without merely repeating the ground of the
March 20, 2009, report.

1. The
decline in Western asset values will likely continue in the broad sense through
2010, which will automatically lead to a compounded reduction in the asset-based
credit available. In other words, Western economies will be forcibly
"de-levered", quite apart from the fiscal prudence which will cause a reduction
in risk investment;

2. The
West will demonstrably not contest dominance of the major oil and gas fields of
Iraq, Iran, Nigeria (and elsewhere in the Gulf of Guinea) against competition
from the People's Republic of China (PRC) and, to a lesser extent, India. This
will force moves in the US toward natural gas exploitation and - as Obama and
the "green left" depart - possible exploitation of US oilfields and new nuclear
energy approaches. This would in turn imply a renewed look at nuclear waste
disposal. But none of this Western search for alternatives will occur in 2010.

3. The
conflict in Afghanistan will become increasingly strained as the US sends out,
literally, signals of surrender to the Taliban, who take all calls from the US
for a "negotiated settlement" in the wake of a pronouncement of US imminent
withdrawal as a sign of weakness and defeat. It is, in fact, such a signal. And
while senior US military and security officials "reassure" regional states, such
as Pakistan, that the US would, in fact, remain in the area beyond the Obama
withdrawal deadline of 2011, the reality is that - absent the removal of Obama
from office - this will not happen. Once again, the "long-timers" in the US
bureaucracy, including those in Defense and State, believe that they can outwait
and outwit the "short-timers". But the determined short-timer, such as Pres.
Obama, can and will wreak havoc and destroy the pillars of the system before he
leaves. And when Obama leaves, the money, in any event, will be also gone, and
with it the capability and viability for the US to remain in or near
Afghanistan. Indeed, the destruction of key elements of the US economic and
political framework has already occurred.

4.
Quite apart from the US ability to sustain South Asian operations in the manner
which the Washington insiders have assured the Pakistanis (and others, such as
the Australians), the reality is that India - which the US has been courting as
a strategic partner - will of necessity have to re-align with Russia if it is to
gain any access to the Eurasian heartland. If it does not, it will never be able
to compete strategically in the near future with the PRC, which is pushing ahead
with the construction of more efficient overland links to the Indian Ocean
through Myanmar and through Pakistan (from the Karakoram Highway down to the
Baluchistan Arabian Sea port of Gwadar, which had been offered twice by Pakistan
to the US, which refused it).

5. A
strategic opportunity is emerging for the West - and possibly for India ˇ in the
transformation now occurring in Myanmar as the ruling military leaders take very
seriously their approach to elections later in 2010. This could - could, not
necessarily will - mean that Myanmar opens to a more Western orientation to the
detriment of the PRC, but only if the US can support the notion of providing
some measure of post-election security, ideally within Myanmar, for the retiring
military leaders. The US lost massive credibility in this kind of undertaking
when it lured Liberian Pres. Charles Taylor into exile in Nigeria in 2003 and
then broke promises of safe-haven for him, and organized his subsequent
extradition to the UN's International Criminal Court (ICC), to which the US does
not even subscribe.

6. As
global productivity fades during 2010 (albeit with some pockets of resilience),
many Western leaders will turn to sophistry and intellectual distractions, such
as an attempt to assert or blame "international law" as the mechanism for
remedying their situations. There is, in reality, no such thing as
"international law", but there is an attempt to create it, even absent global
acceptance of such a concept. There are norms of international behavior, but,
strictly speaking, the United Nations (around which much of the proposed
"international law" is being built) specifies the right of nations and peoples
to self-determination, free from external interference. But what we are seeing
is the creation of a minority-controlled set of structures - such as the
"International Criminal Court" and its derivatives - creating laws without any
valid legal framework. The ICC derivative judging "war crimes" in the former
Yugoslavia, for example, has been making up laws and case law to validate its
position. In any event, 2010 will see a stark removal of the media-perpetuated
view that "international law" exists. The PRC and India have already indicated
that they will not comply with so-called climate change measures; they will not
commit their populations to starvation by forcing emission reduction measures on
their industries, making them unaffordable or uncompetitive. This, as I have
often said, is part of the trend which sees nations moving back toward
nationalistic stances and protectionism. "International law", and the United
Nations itself, is heading toward irrelevancy. The feel-good gatherings, such as
the World Economic Forum, at Davos, Switzerland and even the Copenhagen
conference on "climate change", become mere distractions from the real issues
facing the world.

7. The
unease and conflict in the Arabian Peninsula will continue apace, with strong
Iranian support and some Russian interest, merely because there is nothing to
stop it. Only a total compromise of Yemen Pres. Ali Abdullah Saleh to Iran -
something which would greatly antagonize Saudi Arabia - can bring the fighting
in the area to a more contained level, and even that would signify an Iranian
victory. Inter-governmental talks on the security and stability of Yemen, held
in London on January 27, 2010, were essentially cosmetic, and signified the lack
of Western commitment to addressing the problem in the Arabian Peninsula and the
Red Sea. The most significant unknown factor is the degree to which Oman can
stop the spread of unrest into its country, which controls the southern littoral
of the Strait of Hormuz. Equally, Oman's unique culture, and the strength of its
leader, Sultan Qaboos bin Sa'id al-Said, is its best safeguard, as well as the
West's best hope for security at the Strait.

8. It
is in a climate of profound international distrust in any Western support or
ability to protect that we will see the transition of power occurring in places
such as Egypt and Nigeria in 2010. Both states are critical to the West, both
geopolitically and in energy terms. France has offered a strong degree of
support for a stable Egyptian transition, but the rest of the West has been
fairly impotent. Similarly, Pakistan is undergoing a constitutional crisis which
may see Pres. Asif Ali Zardari removed by the Supreme Court which he,
essentially, helped reinstate after the end of the Musharraf Administration.
Even if Pres. Zardari can circumvent the mounting constitutional legal case
being mounted against him, his powers are being eroded by the National Assembly.

9. It
is profoundly unlikely that Israel will militarily attack Iran in 2010, or in
the foreseeable future. As a result, the clerical leadership in Iran will move
inexorably toward greater consolidation, a process which will occur in diametric
contrast to the rising shrillness of US condemnation of Iran's nuclear position.
The reality is that (a) international embargoes against Iran have already
failed, and new embargoes cannot be implemented as long as Russia and the PRC
guarantee Iranian trade, (b) the US (and Israel) cannot militarily attack Iran
with any hope of a positive strategic outcome because the nuclear and National
Command Authority targets are too diffuse and there is no capability of a
ground-force follow-up, and (c) the Iranian population would, as they have
always done, react with great hostility to any foreign attack, rallying around
the government of the day, even if they have despised it. The only hope of what
the US calls "regime change" in Iran can come if it is at the hands of the
Iranian population, and Russian and PRC support for the Administration of Pres.
Mahmoud Ahmadinejad's security services has ensured that the Iranian public
cannot effectively combine to remove him. Still, mounting internal frustration
in Iran could result in a coup by the Iranian Revolutionary Guard Corps (IRGC:
Pasdaran).

10.
The People's Republic of China will continue to manage the great internal
disparities through 2010, but there is no guarantee that Beijing will not face
major hurdles in the year. Moreover, the continuing poor economic performance in
Japan and the US will continue to constrain PRC exports and dampen PRC economic
options given the extent of Chinese holdings of US securities which grow less
attractive by the day.

This article was written by Gregory R.
Copley for Oilprice.com who focus on Fossil Fuels, Alternative Energy, Metals,
Crude Oil Price, and Geopolitics. To find out more visit their website at:
http://www.oilprice.com